Natural gas prices outlook – 24 May

The natural gas prices continue to surprise and make a comeback even though the natural gas market is slowing down as North America exists the heating season and the winter into the spring.


Let’s see what is up ahead for natural gas prices during this week updated to today, May 24th:

Natural gas prices May 2011 – update


The tornado season in the US is still on and the current weather forecasts predict upcoming tornados in the South. In the Northeast there might be some showers and a cold front tonight, but the temperatures will still be higher than the normal temperatures in this region.

Natural gas prices started off the month of May falling very precipitately; afterwards, natural gas (Henry Hub) spot price remained  between 4.25$ and 4.05$. Yesterday, however, natural gas rose again very rapidly by nearly 6% for spot price, as seen in the chart below.


Natural gas spot price future (Henry Hub) April - May 2011 MAY 24

This rise might have been stem, in part, over the concerns that the tornados in certain parts in US including Missouri might have also damaged natural gas pipelines.

According to the EIA, some of the US’s natural gas pipelines go through these tornado hit regions including Missouri.

Future and spot prices

The contango (the premium of Henry Hub future over spot prices) reached on Monday, May 23rd 0.06$/mmbtu, i.e. spot prices were lower than the future price by six cents. The premium started off the month of May falling from Contango to Backwardation; however, in the past couple of weeks this gap changed direction and started to incline from   Backwardation to Contango.


Contango  Backwardation Natural gas (Henry Hub) Future-Spot  April May  2011 MAY 24

News from Middle East, Europe and US


A detailed analysis and review of recent news and events is presented in a oil outlook post I have written in the following link.


Current Natural gas price

Natural gas future price is currently traded with very moderate falls in U.S. market:

The Nymex Henry Hub natural gas price, short term futures (June 2011 delivery) is traded at 4.34 USD / MMbtu, a 0.01 USD decrease or 0.14%, as of 15.24*.

(* GMT)


Natural gas spot price Outlook:


As I have stated in the May outlook report, natural gas prices will continue to be high for the season, however for now it seems that the rising prices are coming from different reasons – mainly over the concerns over the damage that might have caused the tornados.


The downfall in natural gas prices at the beginning of the month was probably due to the shift in seasons as the temperatures rise, the demand for hearing decline and so does the demand for natural gas. The strengthening of the US dollar compared to other major currencies might have also played a small role in natural gas prices’ decline.


I speculate that current natural gas prices might further rise, moderately, as long as crude oil prices will remain high, because the high oil prices might shift some of the demand for energy, wherever possible, from crude oil to natural gas. The chart below shows the rise in the WTI spot oil price to Henry Hub spot price ratio.



Natural gas spot price future (Henry Hub) and WTI spot oil prices Jan - May 24 2011


For further reading (on this site):